not vested
Selangor Properties a long-term play Unlike most property developers, the company mainly derives its income from property investments located in Bukit Damansara, one of Kuala Lumpur’s swankiest addresses, as well as certain properties in Australia.
With almost no launches in recent years to speak of except for Aira Residence in Bukit Damansara, and shares that hardly move except for a recent spike in late May, the counter is not much covered by analysts.
CIMB Research, which has initiated coverage on the stock under the small-and-mid-cap research scheme, has a “hold” call on the stock with a target price of RM5.12 per share.
It points out that Selangor Properties is “sitting on gold”, as the company has 42 acres of prime, mostly freehold, land in Bukit Damansara and Bukit Tunku that are ripe for development or redevelopment. These parcels of land are worth RM1.8bil and it has net cash of RM775mil.
However, this is one company that is not in any hurry. It has not hurried before, and it will not hurry now. In the infrequent times that the company has appeared in the media, its Bukit Damansara landbank and investment properties have been highlighted. The question is, when will the assets be monetised?
CIMB Research says that nothing is going to happen until the property market perks up, and the research house sees this happening around 2019. That may be when a potential rerating of the stock could come around, especially when the company decides to monetise some of that valuable landbank.
The research house admits that despite the RM5.12 target price, the upside in the short term looks limited. The share price is currently languishing below RM5.
Instead, CIMB Research suggests that “investors with longer investment horizons may find the stock attractive at such cheap valuations”, given its net cash per share of RM2.25 and valuable landbank.
What is holding the counter back right now is also the low core return on equity that CIMB Research estimates to be around 1% to 3% from financial year ending Oct 31, 2017 (FY17) to FY19, as one-third of the assets are cash or cash equivalents that generate low returns.
That will make the counter seemingly undervalued, but because it trades at 30 times the 2018 price-earnings ratio, it is one of the most expensive property stocks under CIMB Research’s coverage.
“We value the stock based on a 50% discount to its revised net asset value; the large discount reflects the uncertainty about its landbank development timeframe and low trading liquidity,” it says. This is a stock for those who certainly have time on their hands and enjoy a leisurely morning cuppa.
Source: The Star
http://www.thestar.com.my/business/busi ... hCQALM4.99
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